Gas Crunch Endangers Transmission Investment
- Mar 17, 2022 4:09 pm GMT
The United States desperately needs new power lines. To get an idea of our transmission development stagnation, consider this fact pointed out in an Atlantic article last year: “Since 2009, China has built more than 18,000 miles of ultrahigh-voltage transmission lines. The U.S. has built zero.”
Our transmission standstill has a number of consequences. First of all, it raises consumer prices. This point was made clear early this year in these graphs published at CanaryMedia. Here’s the author’s insight:
“Two trends are clear. First, the cost of generating power has declined significantly — from 6.8 cents per kilowatt-hour in 2010 to 4.6 cents per kWh in 2020, using 2020 inflation-adjusted figures. That’s due largely to falling natural gas prices and the growing share of power coming from wind and solar. With renewables making up the vast majority of new generation capacity, the generation share of utility costs is likely to continue declining over the coming decade.
At the same time, the costs of the infrastructure needed to deliver power rose from 2.6cents per kilowatt-hour in 2010 to 4.3 cents per kWh in 2020 — nearly equal to the cost of generating the power itself. Delivery costs have in fact been rising steadily since 1998, according to the EIA — an outgrowth of the need for new grid infrastructure to replace aging lines and equipment and accommodate new wind and solar power farms, as well as for new technologies such as smart meters to modernize the utility system. And according to multiple studies, the U.S. will need much bigger grid investments in future years to accommodate the massive growth in renewable energy that will be required to decarbonize the power sector.”
For basically the same reasons an underdeveloped transmission system raises prices, it slows the country’s transition to green energy. All the wind and solar power in the world is no good if it can’t be delivered to the metropolitan areas that need it most.
In addition to needing new, fast power lines to move a more diverse energy portfolio, many parts of the country need new transmission infrastructure that’s more resistant to wildfires. I'm mostly referring to the American West.
In the recent past, regulations and economics have made transmission development difficult. That’s why we’re in the situation we are now. Unfortunately, things are just getting harder.
As this article in the Wall Street Journal details, soaring natural gas prices are making it very expensive to produce electricity:
“Already, the natural-gas supply crunch has made it substantially more expensive for utilities to purchase or produce electricity. As a result, some customers have seen winter power bills increase by 20% or more compared with the year before, in addition to seeing higher home-heating bills.
Now, with sanctions against Russia threatening to further constrain global natural-gas supplies, higher prices are likely to persist, executives and analysts say, especially in regions heavily reliant on the fuel for power generation.
Average retail electricity prices for residential customers rose 4.3% last year to 13.72 cents per kilowatt-hour, the largest annual increase since 2008, according to the Energy Information Administration. The increase, which generally matched inflation overall, was spurred in part by the cost of natural gas delivered to power plants, which more than doubled from 2020.”
This is all very bad news for transmission development. In the recent past, when natural gas was cheaper than dirt, utilities could more easily off-load other investment costs onto the customer. With electricity now so expensive, that’s no longer the case.
Who will pay for those new lines we need so badly?
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